| Release No. 34-25217 Release No. IC-16181 Dec. 21, 1987
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 Table of Contents
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I. Executive Summary
A. Exclusion from Filing Preliminary Proxy Material and Related Amendments
On June 4, 1987, the Commission proposed for public comment amendments to the proxy rules 21 to eliminate the filing by registrants of preliminary proxy and information statements with the Commission under certain circumstances. 22 The proposal was intended to relieve registrants and the Commission of unnecessary administrative burdens and preparation and processing costs associated with the filing and processing of proxy material that is currently subject to selective review procedures, but ordinarily is not selected for review in preliminary form. The Commission today is adopting the proposal with some modifications.
The exclusion affects only filing requirements; the amendments will not affect disclosure requirements or change the likelihood of review. As under current practice, definitive material still will be subject to being selected for review. Currently, definitive material may be reviewed, for example, when full review of a Form 10-K 23 is undertaken, material deficiencies in definitive materials come to the staffs attention, or an opposing solicitation is commenced after definitive material is filed. The rule amendments are not intended to change the current practice.
Related amendments to Rule 14a-3, Rule 14a-8, Rule 14c-3, Schedule 14C, filing fee rules and Item 401 of Regulation S-K also are being adopted by the Commission. These amendments base certain timing and filing requirements on the filing of definitive, rather than preliminary, proxy material. In addition, technical and clarifying amendments to Schedule 14A are being adopted.
B. Amendments to the Shareholder Proposal Rule
Since 1983, Rule 14a-8(a)(1)(ii) has provided that a shareholder proposal may be omitted from the registrants proxy material if the proponent delivers written proxy materials to holders of more than 25% of a class of the registrants securities. In the June Release, the Commission sought comment on eliminating this provision. The commentators were divided on the issue, with shareholder proponents generally favoring and registrants generally opposing the elimination. The Commission also solicited comment on alternative amendments to Rule 14a-8(a)(1)(ii), either to modify the 25% limitation to permit inclusion of shareholder proposals in the registrants proxy material even when the proponent is conducting a solicitation more widespread than that permitted under the present rule, or to retain the 25% limitation and clarify its applicability to exclusion of the proposal from the registrants material for the current meeting of shareholders as well as the meeting held in the following two years.
In view of the recent increase in shareholder activism on corporate governance issues, the Commission is amending Rule 14a-8 to delete the 25% limitation contained in Rule 14a-8(a)(1)(ii), Amendments to Rule 14a-8 to requests for documentary support of a proponents beneficial ownership claim also are being adopted.
II. Discussion of the Amendments
A. Exclusion From Filing Preliminary Proxy Material and Related Amendments
1. Scope
The exclusion from filing preliminary material 24 applies to a proxy or information statement distributed in connection with an annual meeting, or special meeting in lieu of an annual meeting, at which the only matters to be acted upon are the election of directors, the election, approval or ratification of auditors and/or shareholder proposals. 25 With respect to investment companies registered under the Investment Company Act and business development companies, the exclusion applies to any meeting (annual or special) at which the matters to be acted upon include those noted above as well as certain additional matters discussed in detail below. Where the exclusion applies, the Commission will not process preliminary proxy material. 26
Neither submission nor inclusion of a shareholder proposal in a registrants proxy material will make the exclusion inapplicable and require the filing of preliminary material. Rule 14a-8 provides procedures for the review of shareholder proposals separate from the review of preliminary proxy materials. Under the amendments, as in the past, the staff will handle questions and disputes about the inclusion and characterization of shareholder proposals, as well as objections to statements in opposition, independently of the preliminary filing process.
The exclusion does not apply if the registrant comments on or refers to a solicitation in opposition in connection with the forthcoming meeting in its proxy material. 27 A note defines "solicitation in opposition" as any solicitation opposing a proposal supported by the registrant and any solicitation supporting a proposal that the registrant does not expressly support, other than a shareholder proposal included in a registrants proxy material. 28 The note also clarifies that the inclusion of a shareholder proposal in a registrants proxy material does not constitute a "solicitation in opposition," even if the registrant opposes the proposal or includes a statement in opposition to the proposal. 29
a. Treatment of Investment Companies
The amendments require that investment companies and business development companies file only definitive material where the matters to be acted upon at any meeting, in addition to any discussed above, are a proposal to continue, without change, an advisory or other contract or agreement that previously has been the subject of a proxy solicitation for which proxy material was filed with the Commission and/or, in the case of an open-end investment company, a proposal to increase the number of shares authorized to be issued. The exclusion from filing preliminary proxy material applies to any meeting of investment company shareholders, rather than only an annual or special meeting in lieu of an annual meeting as proposed, because state law does not always require investment companies to hold annual meetings. The exclusion has been expanded to include business development companies (although they are not afforded the same favorable treatment with respect to annual meetings that investment companies are afforded under state law), because they deserve comparable treatment for the routine proxy issues discussed above.
Investment companies will not file preliminary proxy material in connection with an advisory or other contract only where the contract or agreement that is the subject of the vote already has been voted upon (either when initially adopted or subsequently continued) by the public shareholders. The phrase "without change" nonetheless allows, for example, for changes in the date of the agreement, new signatures or correction of any typographical errors.
The exclusion from filing preliminary material dealing with an increase in shares is limited to open-end companies. Dilution of control (the primary issue that arises in connection with a proposal to authorize new shares) is rarely an important consideration for open-end investment company shareholders. Thus, such proposals tend to be routine and staff review ordinarily is not essential.
b. Proposal Relating to Solicitations in Opposition and Notice
The June proposal was designed to require the filing of preliminary material where a solicitation in opposition in connection with the forthcoming meeting had been or was about to be undertaken. At the same time, the proposal recognized that a registrant could have its printing, distribution and meeting schedule disrupted if it learned of a solicitation in opposition shortly before definitive material was to be filed. Accordingly, the proposal contained provisions that would have required the filing of preliminary material if a party had commenced a solicitation in opposition or if the registrant had received notice of the intention of a party to commence such a solicitation, unless the solicitation was commenced or notice was first received during the 45 calendar days prior to the registrants scheduled meeting date, and the registrant did not comment on or refer to such solicitation in its proxy material.
After considering the feasibility of the proposed provisions, the Commission has decided not to adopt them as proposed. Even where a solicitation in opposition has been or is about to be commenced, there is no reason to preclude reliance upon the exclusion from filing in preliminary form where the proxy material addresses only those matters triggering the exclusion, and does not comment on or refer to the opposing solicitation.
The Commission therefore has determined that proxy material otherwise meeting the requirements for the exclusion needs to be filed in preliminary form only if the registrant comments on or refers to a solicitation in opposition. This modification is consistent generally with the current review practice and effectuates more fully the original objective of the proposed amendments, which was to decrease burdens on registrants associated with the filing of preliminary material that deals with ordinary matters and is unlikely to be selected for review by the staff. The modification also obviates the need to resolve practical problems with the proposed notice provisions, which were identified by commentators, including potential disputes over whether or when notice was given and the inadequacy of the proposed 45 calendar day period for the printing and distribution of proxy materials.
2. Related Amendments to Rule 14a-8, Shareholder Proposal Rule
To accommodate the changes in filing requirements, it is necessary to amend paragraphs (d) and (e) of Rule 14a-8. The time periods in these provisions now will be based on the filing of definitive, rather than preliminary, material. Paragraph (d), as amended, requires that the registrant notify the Commission and the proponent of its assertion that a proposal may be omitted at least 80 calendar days prior to the date of filing the definitive proxy material, rather than 60 calendar days prior to the date of filing preliminary material. Similarly, Instruction 2 of Item 4 of Schedule 14C is amended to require that, if the registrant intends to rule a shareholder proposal out of order, it should so advise the Commission 20 calendar days prior to the date that definitive copies of the information statement are to be filed, rather than at the time it files the preliminary copies of its information statement.
Paragraph (e) of Rule 14a-8 is amended to require that, not later than 30 calendar days prior to the filing of definitive proxy material with the Commission, the registrant forward to a shareholder proponent a copy of any statement in opposition to the proponents resolution that the registrant intends to include in the proxy statement. Previously, this time period was 10 calendar days prior to the filing of preliminary material.
In addition, the Commission is amending the last paragraph of Rule 14a-8(e) to require that a proponent who believes that the registrants statement in opposition is false and misleading, and so informs the Commission, provide a copy of the statement in opposition to the Commission along with his letter. The amendment will help prevent delays in review where the Commission has not been furnished with a copy of the statement in opposition.
3. Filing Fees and Other Related Amendments
To accommodate the changes in filing requirements, the Commission is amending the filing fee requirements in Rules 14a-6(j) and 14c-5(g), 30 and in Rule 20a-1 under the Investment Company Act. The amendments require that where preliminary material is not required to be filed, a filing fee be paid when definitive material is filed. 31
Additional technical revisions are being adopted to make Rule 14a-3(c), 32 Note 2 to Rule 14a-6(a), and Rules 14a-6(j) and 14c-3(b) 33 consistent with the elimination of the filing of certain preliminary proxy material. Rules 14a-3(c) and 14c-3(b) are being revised to add that, if preliminary filing is not required, copies of annual reports shall be mailed to the Commission not later than the date on which such reports are first sent or given to security holders or the date on which definitive material is filed. The word "proxy" is being substituted for the word "preliminary" in the first sentence of Note 2 to Rule 14a-6(a). Rule 14a-6(j) is being amended to eliminate a reference to "preliminary material" in introductory language and a reference to the solicitation of proxies for the "election of directors" with regard to preliminary material. 34
B. Amendments to Rule 14a-8
1. Deletion of the 25% limitation in Rule 14a-8(a)(1)(ii)
Shareholder activism has increased in recent years. In the past proxy season, votes favoring shareholder proposals concerning corporate governance issues reached historically high levels. 35 In view of this increased shareholder interest in matters of corporate governance, 36 the Commission is adopting amendments to delete the 25% limitation in Rule 14a-8. 37 The deletion permits shareholder proposals that are included in registrants proxy material to be accompanied by more widespread independent solicitations. 38 Such independent solicitations may increase shareholder participation and broaden the opportunities for shareholders to receive information on corporate governance issues, as well as foster debate on these issues. The Commission intends to monitor the practical effects of the deletion of the 25% limitation.
The deletion of the 25% limitation does not and is not intended to permit access to registrants proxy materials for a party in an election contest. Shareholder proposals that relate to an election contest and/or are counter to a proposal to be submitted by the registrant at the meeting continue to be subject to exclusion from registrants proxy materials under Rules 14a-8(c)(8) and (9). 39
2. Requests for Documentary Support of Beneficial Ownership
Rules 14a-8(a)(1) and (2) set forth eligibility and other requirements for shareholder proposals. At the time a proposal is submitted, the proponent must be a record holder or beneficial owner of at least 1% or $1,000 in market value of securities entitled to be voted on the proposal at the meeting and have held the securities for at least one year. 40 At that time, the proponent also must provide the registrant in writing with his or her name, address, the number of the registrants voting securities held of record or beneficially, the dates on which the securities were acquired, and, in the case of beneficial ownership, documentary support for such a claim. 41 If the proponent fails initially to furnish documentary support for a claim of beneficial ownership, the registrant must request such support before the proposal is excludable under the Rule. Prior to these amendments, that request could have been made at any time.
In the June Release, the Commission proposed that a registrant be required to make any such request promptly. Alternatively, the Commission solicited comment on a fixed time period, such as 10, 14 or 21 calendar days. The Commission is amending Rule 14a-8(a)(1) to require that a registrants request for documentation of a proponents beneficial ownership be made within 14 calendar days after receipt of the shareholder proposal, where the proponent has failed to provide such documentation as required. 42 This amendment provides an early time period in the Rule for resolving issues of documentary support. 43 A fixed time period is being adopted to avoid any dispute or interpretive questions over the meaning of "promptly."
Further, the Commission is amending Rule 14a-8(a)(1) to change from 14 to 21 calendar days the time period within which a proponent must furnish appropriate documentation of beneficial ownership after being requested to do so by a registrant. Since documentary support frequently is obtained from independent third parties, the Commission believes additional response time is warranted. Commentators noted difficulty in obtaining the necessary documentary support from record holders within the 14 calendar day period currently provided.
The Commission also is amending Rule 14a-8(a)(1) to codify its interpretive position that a written statement by a record owner or an independent third party, such as a depository or broker-dealer holding the securities in street name, of the proponents holding of the registrants securities for the relevant one year time period is appropriate documentation for a proponents beneficial ownership claim. In addition, the Commission is amending the Rule to require that a registrant accept, as appropriate documentation of a proponents beneficial ownership, a copy of ownership reports or amendments to such reports filed by the proponent with the Commission that indicate the proponents beneficial ownership as of or prior to the date on which the relevant one year period commences, if supported by a copy of all subsequent amendments reporting a change in ownership level and the proponents affidavit 44 attesting that the proponent has continued beneficial ownership of such securities throughout the required one year period and as of the date of the affidavit. The filings that a registrant is required to accept for these purposes are Schedule 13D, 45 Schedule 13G, 46 Form 13F, 47 Form 3 48 and Form 4 49 and any amendments thereto.
Regardless of the form of documentation utilized, the proponent is required to submit a written statement that he intends to continue beneficial ownership through the meeting date. Continuous beneficial ownership already is required by Rule 14a-8(a)(1); the Commission is amending the Rule to highlight this requirement.
As noted in the June Release, requests by registrants for documentation of ownership from record holders who submit shareholder proposal are neither appropriate nor consistent with Rule 14a-8. A record holders proposal may not be omitted from the registrants proxy material on the grounds that the record holder failed to provide documentation of ownership.
In addition, some registrants have conditioned the voting of proxies received with respect to a Rule 14a-8 shareholder proposal on the proposal being "seconded" at the meeting. Because Rule 14a-8(a)(2) does not require a "second," the voting of proxies received with respect to a shareholder proposal included in a registrants proxy material pursuant to Rule 14a-8 may not be conditioned upon the proposal being seconded at the meeting, absent a second being required by state law or by the registrants governing instruments. 50 If a second is required, it would be appropriate for the registrant to so advise the proponent a reasonable time before the meeting.
C. Other Technical and Clarifying Amendments
The Commission also is adopting technical and clarifying amendments to Schedule 14A. An amendment to Item 4, Persons Making the Solicitation, of Schedule 14A restores a sentence that was dropped inadvertently when Item 4 was revised in November 1986. The sentence clarifies that any person who would be a participant in a solicitation for purposes of Rule 14a-11, as defined in paragraph (b)(3), (4), (5) and (6) of that Rule, is deemed to be a person on whose behalf the solicitation is made for purposes of paragraph (a) of Item 4.
Technical amendments to Item 10, Compensation Plans, of Schedule 14A are being adopted to provide, consistent with staff interpretation, that Item 10(a)(2)(iii), Item 10(a)(3)(iii) and Item 10(b)(2)(ii)(C) do not require separate disclosure with regard to current officers who are not executive officers. Rather, information regarding those officers will be included in the disclosure for "all employees as a group" in Item 10(a)(2)(iv), Item 10(a)(3)(iv) and Item 10(b)(2)(ii)(G). 51
III. Cost-Benefit Analysis
In the June Release, the Commission requested commentators to provide views and data as to the costs and benefits associated with amending the filing requirements for proxy and information statements. The Commission noted that the elimination of the requirements to file preliminary proxy and information statements in certain circumstances should reduce some costs for those registrants who meet the requirements of the amendments.
Fourteen commentators expressed views and/or provided data as to the costs and benefits associated with the proposed amendments to the filing requirements. Eight commentators stated that elimination of the requirement to file proxy materials in preliminary form would result in time and cost savings to both the Commission and registrants. Seven commentators expressed concern that certain aspects of the proposed amendments potentially could increase costs to registrants. Four of these commentators expressed concerns about potential costs where definitive material is reviewed by the staff. Clarification of the Commissions intent with respect to review of definitive material has been included in this release. Three of the commentators expressed cost-related concerns regarding the brevity of the proposed 45 calendar day period. The Commission is not adopting the notice provisions related to the proposed 45 calendar day period.
The Commission also requested commentators to provide views and data concerning the costs and benefits of amending the shareholder proposal rule and filing fee requirements. In this regard, the Commission stated that the deletion or modification of Rule 14a-8(a)(1)(ii) might impose some costs on registrants and reduce some costs for proponents of shareholder proposals, but that the other proposed amendments to the shareholder proposal rule should not increase or decrease significantly costs for registrants or proponents.
Twenty-two commentators expressed views and/or provided data concerning the costs and benefits of amending the shareholder proposal rule. Eleven of these commentators stated that the benefits to shareholder proponents of eliminating Rule 14a-8(a)(1)(ii) would outweigh the costs to registrants. These commentators asserted that the costs of conducting independent solicitations are prohibitively high and suggested that registrants would not incur appreciably greater costs due to the increase in the number of shareholder proposals that might result from elimination of the rule. Ten commentators stated that registrants should not be required to bear the additional expense of including shareholder proposals in their proxies where the proponent undertakes the costs of communicating with other shareholders. One commentator expressed concerns about the costs of amending the shareholder proposal rule during the 1988 proxy season. The Commission has included in the release detailed information regarding the effectiveness of the amendments.
Comments also were requested on the effects of the proposals on the costs to small entities. No comments on this subject were received.
IV. Final Regulatory Flexibility Analysis
A Final Regulatory Flexibility Analysis in accordance with 5 U.S.C. 604 has been prepared regarding the amendments to Exchange Act Rules 14a-3, 14a-6, 14a-8, 14c-3, 14c-5, Schedule 14A, Schedule 14C, to Investment Company Act Rule 20a-1 and to Item 401 of Regulation S-K. Members of the public who wish to obtain a copy of the Final Regulatory Flexibility Analysis should contact Barbara J. Green or Elizabeth M. Murphy, (202) 272-2589, Office of Disclosure Policy, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The corresponding Initial Regulatory Flexibility Analysis appears at 52 FR 22334 (Release No. 34-24552).
V. Statutory Basis
The amendments to the proxy rules are being adopted by the Commission pursuant to Sections 14 and 23(a) of the Securities Exchange Act of 1934. The Commission finds good cause under 5 U.S.C. 553(d) to make the deletion of paragraph (a)(1)(ii) from Rule 14a-8 effective immediately upon publication in the Federal Register. Before amendment, Rule 14a-8(a)(1)(ii) provided that proponents who delivered written proxy materials to holders of more than 25% of a class of the registrants outstanding securities entitled to vote with respect to the same meeting of shareholders would be ineligible to use Rule 14a-8 for the inclusion of a proposal in the registrants proxy materials. The Rule also set forth further restrictions to be imposed upon proponents who exceeded the 25% limit. The Commission is rescinding Rule 14a-8(a)(1)(ii) upon publication in the Federal Register in order to facilitate communications between shareholders, foster corporate democracy and alleviate the significant burdens it imposes upon shareholder proponents. Also, immediate effectiveness of the amendment will eliminate the need to draw an arbitrary line for effectiveness during the current proxy season, thus providing the benefit of the change to a greater number of shareholder proponents during this proxy season.
List of Subjects in CFR Parts 229, 240 and 270
Reporting and recordkeeping requirements, securities.
VI. Text of the Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows:
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975--REGULATION S-K
1. The authority citation for Part 229 continues to read, in part, as follows:
Authority: Secs. 6, 7, 8, 10, 19(a), 48 Stat. 78, 79, 81, 85; secs. 12, 13, 14, 15(d), 23(a), 48 Stat. 892, 894, 901; secs. 205, 209, 48 Stat. 906, 908; sec. 203(a), 49 Stat. 704; secs. 1, 3, 8, 49 Stat. 1375, 1377, 1379; sec. 301, 54 Stat. 857; secs. 8, 202, 68 Stat. 685, 686; secs. 3, 4, 5, 6, 78 Stat. 565-568, 569, 570-574; sec. 1, 79 Stat. 1051; secs. 1, 2, 3, 82 Stat. 454, 455; secs. 1, 2, 3-5, 28(c), 84 Stat. 1435, 1497; sec. 105(b), 88 Stat. 1503; secs. 8, 9, 10, 11, 18, 89 Stat. 117, 118, 119, 155; 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 78l, 78m, 78n, 78l(d), 78w(a) * * *
2. By amending §229.401 by revising Instruction 2 to paragraph (f) to read as follows:
§229.401 (Item 401) Directors, executive officers, promoters and control persons.
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Instructions to paragraph (f) of Item 401.
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2. If any event specified in this paragraph (f) has occurred and information in regard thereto is omitted on the grounds that it is not material, the registrant may furnish to the Commission, at time of filing (or at the time preliminary materials are filed, or ten days before definitive materials are filed if preliminary filing is not required, pursuant to Rule 14a-6 or 14c-5 under the Exchange Act (§§ 240.14a-6 and 240.14c-5 of this chapter)), as supplemental information and not as part of the registration statement, report, or proxy or information statement, materials to which the omission relates, a description of the event and a statement of the reasons for the omission of information in regard thereto.
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PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
3. The authority citation for Part 240 continues to read, in part, as follows:
Authority: Sec. 23, 48 Stat. 901, as amended (15 U.S.C. 78w) * * *
4. By amending §240.14a-3 by revising the first sentence of paragraph (c) to read as follows:
§240.14a-3 Information to be furnished to security holders.
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(c) Seven copies of the report sent to security holders pursuant to this rule shall be mailed to the Commission, solely for its information, not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies, or definitive copies, if preliminary filing was not required, of solicitation material are filed with the Commission pursuant to Rule 14a-6, whichever date is later. * * *
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5. By amending §240.14a-6 by adding two sentences at the end of paragraph (a), revising the first sentence of note 2 to paragraph (a), adding new notes 3 and 4 to the end of paragraph (a), adding a new note to the end of paragraph (c), revising the first phrase of the introductory text of paragraph (j), revising paragraphs (j)(1), (2) and (3) and redesignating them as paragraphs (j)(2), (3) and (4) and adding new paragraph (j)(1) to read as follows:
§240.14a-6 Filing requirements.
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(a) * * * A registrant, however, shall not file with the Commission a preliminary proxy statement, form of proxy or other soliciting material to be furnished to security holders concurrently therewith if the solicitation relates to an annual (or special meeting in lieu of the annual) meeting, or for an investment company registered under the Investment Company Act of 1940 15 U.S.C. 80a-1 et seq. or a business development company, if the solicitation relates to any meeting of security holders at which the only matters to be acted upon are: (1) the election of directors; (2) the election, approval or ratification of accountant(s); (3) a security holder proposal included pursuant to Rule 14a-8 §240.14a-8 of this chapter; (4) with respect to an investment company registered under the Investment Company Act of 1940 or a business development company, a proposal to continue, without change, any advisory or other contract or agreement that previously has been the subject of a proxy solicitation for which proxy material was filed with the Commission pursuant to this rule; and/or (5) with respect to an open-end investment company registered under the Investment Company Act of 1940, a proposal to increase the number of shares authorized to be issued. This exclusion from filing preliminary proxy material does not apply if the registrant comments upon or refers to a solicitation in opposition in connection with the meeting in its proxy material.
Note 1. * * *
Note 2. The official responsible for the preparation of the proxy material should make every effort to verify the accuracy and completeness of the information required by the applicable rules. * * *
Note 3. Solicitation in Opposition. For purposes of the exclusion from filing preliminary proxy material, a "solicitation in opposition" includes: (a) any solicitation opposing a proposal supported by the registrant; and (b) any solicitation supporting a proposal that the registrant does not expressly support, other than a security holder proposal included in the registrants proxy material pursuant to Rule 14a-8 §240.14a-8 of this chapter. The inclusion of a security holder proposal in the registrants proxy material pursuant to Rule 14a-8 does not constitute a "solicitation in opposition," even if the registrant opposes the proposal and/or includes a statement in opposition to the proposal.
Note 4. A registrant that is filing proxy material in preliminary form only because the registrant has commented on or referred to a solicitation in opposition should indicate that fact in a transmittal letter when filing the preliminary material with the Commission.
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(c) * * *
Note. A registrant that is filing definitive proxy material without payment of a fee should state in the first paragraph of the transmittal letter that no fee is being paid because a fee was paid upon filing of preliminary proxy material.
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(j) Fees. At the time of filing the proxy solicitation material, * * *
(1) For definitive proxy material relating to a solicitation for which the registrant does not file preliminary proxy material, a fee of $125; (2) for preliminary proxy material that solicits proxies for business for which a stockholder vote is necessary, but apparently no controversy is involved, a fee of $125; (3) for preliminary proxy material where a contest as set forth in Rule 14a-11 is involved, a fee of $500 from each party to the controversy; and (4) for preliminary proxy material involving acquisitions, mergers, spinoffs, consolidations or proposed sales or other dispositions of substantially all the assets of the company, a fee established in accordance with Rule 0-11 §240.0-11 of this chapter shall be paid. No refund shall be given.
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6. By amending §240.14a-8 by revising the second sentence of paragraph (a)(1)(i), the introductory text of paragraph (d), and paragraph (e), adding a new sentence to follow the second sentence of paragraph (a)(1)(i), removing paragraph (a)(1)(ii) and redesignating paragraph (a)(1)(i) as (a)(1) as follows:
§240.14a-8 Proposals of security holders.
(a) * * *
(1) Eligibility. * * * If the registrant requests documentary support for a proponents claim that he is the beneficial owner of at least 1% or $1000 in market value of such voting securities of the registrant or that he has been a beneficial owner of the securities for one or more years, the registrant shall make such request within 14 calendar days after receiving the security holder proposal and the proponent shall furnish appropriate documentation within 21 calendar days after receiving the request. Appropriate documentation of the proponents claim of beneficial ownership shall include: (i) a written statement by a record owner or an independent third party, accompanied by the proponents written statement that the proponent intends to continue ownership of such securities through the date on which the meeting is held; or (ii) a copy of a Schedule 13D §240.13d-101 of this chapter, Schedule 13G §240.13d-102 of this chapter, Form 13F §249.325 of this chapter, Form 3 §249.103 of this chapter and/or Form 4 §249.104 of this chapter, or amendments thereto, filed with the Commission and furnished to the registrant by the proponent, provided that such filings indicate the proponents beneficial ownership as of or prior to the date on which the relevant one year period commences, and are supported by (A) a copy of all subsequent amendments reporting a change in ownership level, (B) the proponents affidavit, declaration, affirmation or other similar document provided for under applicable state law attesting that the proponent continued to be the beneficial owner of at least 1% or $1000 in market value of such voting securities of the registrant throughout the required one year period and as of the date of the affidavit, declaration, affirmation or other similar document provided for under applicable state law, and (C) the proponents written statement that the proponent intends to continue ownership of such securities through the date on which the meeting is held. * * *
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(d) Whenever the registrant asserts, for any reason, that a proposal and any statement in support thereof received from a proponent may properly be omitted from its proxy statement and form of proxy, it shall file with the Commission, not later than 80 calendar days prior to the date the definitive copies of the proxy statement and form of proxy are filed pursuant to Rule 14a-6 §240.14a-6 of this chapter, or such shorter period prior to such date as the Commission or its staff may permit, six copies of the following items:
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(e) If the registrant intends to include in the proxy statement a statement in opposition to a proposal received from a proponent, it shall, not later than 30 calendar days prior to the date the definitive copies of the proxy statement and form of proxy are filed pursuant to Rule 14a-6, or, in the event that the proposal must be revised to be includable, not later than five calendar days after receipt by the registrant of the revised proposal, promptly forward to the proponent a copy of the statement in opposition to the proposal.
In the event the proponent believes that the statement in opposition contains materially false or misleading statements within the meaning of Rule 14a-9 and the proponent wishes to bring this matter to the attention of the Commission, the proponent promptly should provide the staff with a letter setting forth the reasons for this view and a copy of the statement in opposition and at the same time promptly provide the registrant with a copy of his letter.
7. By amending §240.14a-101 by adding a second sentence to paragraph (a)(2) of Item 4 and revising paragraphs (a)(2), (a)(3) and (b)(2)(ii)(C) and (G) of Item 10 as follows:
§240.14a-101 Schedule 14A. Information required in proxy statement.
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Item 4. Persons Making the Solicitation --
(a) * * *
(2) * * * Any person who would be a participant in a solicitation for purposes of Rule 14a-11 (§240.14a-11 of this chapter) as defined in paragraph (b)(3), (4), (5) and (6) thereof shall be deemed a person on whose behalf the solicitation is made for purposes of this paragraph (a).
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Item 10. Compensation Plans.
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(a) * * *
(2) State the benefits or amounts which will be received by or allocated to each of the following under the plan being acted upon, if such benefits or amounts are determinable: (i) Each person (stating name and position) specified in paragraph (a)(1)(i) of Item 402 of Regulation S-K (§229.402 of this chapter); (ii) all current executive officers as a group; (iii) all current directors who are not executive officers as a group; and (iv) all employees, including all current officers who are not executive officers, as a group. If such benefits or amounts are not determinable, state the benefits or amounts which would have been received by or allocated to each of the following for the last fiscal year if the plan had been in effect, if such benefits or amounts may be determined: (i) Each person (stating name and position) specified in paragraph (a)(1)(i) of Item 402 of Regulation S-K (§229.402 of this chapter); (ii) all current executive officers as a group; (iii) all current directors who are not executive officers as a group; and (iv) all employees, including all current officers who are not executive officers, as a group.
(3) Furnish the information called for by Item 402(b) of Regulation S-K (§229.402 of this chapter) with respect to all compensation plans now in effect or in effect during the last three years except that information called for in paragraphs (b)(1)(vi) and (vii) and (b)(4) of Item 402(b) of Regulation S-K (§229.402 of this chapter) should be furnished with respect to the last three fiscal years for the following: (i) Each person (stating name and position) specified in Item 402(a)(1)(i) of Regulation S-K (§229.402 of this chapter); (ii) all current executive officers as a group; (iii) all current directors who are not executive officers as a group, if such persons may participate in the plan; and (iv) all employees who may participate in the plan, including all current officers who are not executive officers, as a group. * * *
(b) * * *
(2) * * *
(ii) * * *
(C) all current directors who are not executive officers as a group;
* * * * *
(G) all employees, including all current officers who are not executive officers, as a group.
* * * * *
8. By amending §240.14c-3 by revising the first sentence of paragraph (b) to read as follows:
§240.14c-3 Annual report to be furnished security holders.
* * * * *
(b) Seven copies of the report sent to security holders pursuant to this rule shall be mailed to the Commission, solely for its information, not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies, or definitive copies, if preliminary filing was not required, of the information statement are filed with the Commission pursuant to Rule 14c-5, whichever date is later. * * *
* * * * *
9. By amending §240.14c-5 by adding two new sentences following the second sentence in paragraph (a), new notes 3 and 4 to the end of paragraph (a), a new note to the end of paragraph (b), and revising paragraph (g) to read as follows:
§240.14c-5 Filing requirements.
* * * * *
(a) * * * A registrant, however, shall not file with the Commission a preliminary information statement if it relates to an annual (or special meeting in lieu of the annual) meeting, of security holders at which the only matters to be acted upon are: (1) the election of directors; (2) the election, approval or ratification of accountant(s); and/or (3) a security holder proposal identified in the registrants information statement pursuant to Item 4 of Schedule 14C §240.14c-101 of this chapter. This exclusion from filing a preliminary information statement does not apply if the registrant comments upon or refers to a solicitation in opposition in connection with the meeting in its information statement.
Note 1. * * *
Note 3. Solicitation in Opposition. For purposes of the exclusion from filing a preliminary information statement, a "solicitation in opposition" includes: (a) any solicitation opposing a proposal supported by the registrant; and (b) any solicitation supporting a proposal that the registrant does not expressly support, other than a security holder proposal identified in the registrants information statement pursuant to Item 4 of Schedule 14C §240.14c-101 of this chapter. The identification of a security holder proposal in the registrants information statement does not constitute a "solicitation in opposition," even if the registrant opposes the proposal and/or includes a statement in opposition to the proposal.
Note 4. A registrant that is filing an information statement in preliminary form only because the registrant has commented on or referred to an opposing solicitation should indicate that fact in a transmittal letter when filing the preliminary material with the Commission.
(b) * * *
Note. A registrant that is filing a definitive information statement without payment of a fee should state in the first paragraph of the transmittal letter that no fee is being paid because a fee was paid upon filing of the preliminary information statement.
* * * * *
(g) Fees. At the time of filing the preliminary information statement, or the definitive information statement if no preliminary information statement is filed, the registrant shall pay to the Commission a fee, no part of which shall be refunded, of $125. However, when filing a preliminary information statement regarding an acquisition, merger, spinoff, consolidation or proposed sale or other disposition of substantially all the assets of the company, the registrant shall pay the Commission a fee, no part of which shall be refunded, established in accordance with Rule 0-11 (§240.0-11 of this chapter).
10. By amending §240.14c-101 by revising Instruction 2 to Item 4 as follows:
§240.14c-101 Schedule 14C. Information required in information statement.
* * * * *
Item 4. Proposals by security holders.
* * * * *
Instructions 1. * * *
2. If the registrant intends to rule a proposal out of order, the Commission shall be so advised 20 calendar days prior to the date the definitive copies of the information statement are filed with the Commission, together with a statement of the reasons why the proposal is not deemed to be a proper subject for action by security holders.
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
11. The authority citation for Part 270 continues to read, in part, as follows:
Authority: Secs. 38, 40, 54 Stat. 841, 842; 15 U.S.C. 80a-37, 80c-89 * * *
12. By amending §270.20a-1 by revising paragraph (c) to read as follows:
§270.20a-1 Solicitation of proxies, consents and authorizations.
* * * * *
(c) In lieu of the fees specified in Rule 14a-6 of the general rules and regulations under the Securities Exchange Act of 1934, at the time of filing the preliminary solicitation material or, if no preliminary solicitation material is filed, at the time of filing the definitive solicitation material, the person upon whose behalf the solicitation is made shall pay to the Commission a fee of $125, no part of which shall be refunded.
By the Commission.
1 17 CFR 240.14a-1 through 240.14b-2.
2 17 CFR 240.14a-3.
3 17 CFR 240.14a-6.
4 17 CFR 240.14a-8.
5 17 CFR 240.14a-101.
6 17 CFR 240.14c-1 through 240.14c-101.
7 17 CFR 240.14c-3.
8 17 CFR 240.14c-5.
9 17 CFR 240.14c-101.
10 15 U.S.C. 78a-78kk.
11 17 CFR 270.20a-1.
12 15 U.S.C. 80a-1 et seq.
13 17 CFR 229.401.
14 17 CFR 229.1 et seq.
15 17 CFR 240.14a-8(a)(1)(ii).
16 17 CFR 240.14a-6(a).
17 17 CFR 240.14a-8(a)(1).
18 17 CFR 240.14a-8(d).
19 17 CFR 240.14a-8(e).
20 17 CFR 240.14c-5(a).
21 17 CFR 240.14a-1 through 240.14c-101.
22 Release No. 34-24552 (June 4, 1987) 52 FR 22334 (the "June Release"). The June Release generated letters from 43 commentators. These letters, as well as the comment summary prepared by the staff, are available for public inspection and copying at the Commissions Public Reference Room (see File No. S7-19-87). Three additional comment letters received after completion of the comment summary are not discussed in the commentary summary, but are available in File No. S7-19-87.
23 17 CFR 249.310.
24 See Rules 14a-6(a) and 14c-5(a), as amended.
25 The shareholder proposals referred to are those included in a proxy statement pursuant to Rule 14a-8 or identified in an information statement pursuant to Item 4 of Schedule 14C.
26 Paragraph (b) of Rule 14a-6 17 CFR 240.14a-6(b), which requires copies of any additional soliciting material to be filed in preliminary form at least two business days prior to furnishing such material to shareholders, is not affected by the amendments. Rule 14a-11 17 CFR 240.14a-11, which contains special provisions for election contests, and Rule 14a-12 17 CFR 240.14a-12, which governs solicitations prior to furnishing required proxy statements, also are not affected by the amendments.
27 A note has been added to Rules 14a-6(a) and 14c-5(a) stating that a registrant that is filing proxy material or an information statement in preliminary form only because it has commented on or referred to an opposing solicitation should so state in a transmittal letter when filing the preliminary material with the Commission.
28 Accordingly, solicitations in opposition are not limited to those involving election contests and governed by Rule 14a-11.
29 Where the registrant opposes a shareholder proposal included in the registrants proxy material or comments on or refers to a solicitation in support of that shareholder proposal, the comments or references to the proposal or such solicitation will be considered a part of the registrants statement in opposition and will be treated as such under Rule 14a-8, even if they appear elsewhere in the registrants materials.
30 17 CFR 240.14a-6(j) and 17 CFR 240.14c-5(g).
31 To facilitate processing by the Commission staff, a note has been added to Rules 14a-6(c) 17 CFR 240.14a-6(c) and 14c-5(b) 17 CFR 240.14c-5(b) stating that a registrant that is filing definitive proxy material or a definitive information statement without payment of a fee should state in the first paragraph of the transmittal letter that no fee is being paid because a fee was paid upon filing preliminary material.
32 17 CFR 240.14a-3(c).
33 17 CFR 240.14c-3(b).
34 Minor conforming language revisions also have been made to Instruction 2 to Item 401(f) of Regulation S-K 17 CFR 229.401(f). Additional language has been added to the instruction to state that if any event specified in paragraph (f) has occurred and information in regard thereto is omitted on the grounds that it is not material, the registrant may furnish as supplemental information, ten days before definitive materials are filed (if preliminary filing is not required) materials to which the omission relates, a description of the event and a statement of the reasons for the omission of the information.
35 For example, in the past proxy season of 32 votes on anti-poison pill shareholder proposals 14 drew more than 30% of the shares voted and at least three reached or surpassed 40%. Also, a shareholder proposal to require shareholder ratification of auditors received 61% of the vote, and at two companies shareholder proposals to reduce the supermajority required by fair price amendments received over 30% of the shares voted. See Investor Responsibility Research Center Inc. ("IRRC"), Voting by Institutional Investors on Corporate Governance Issues in the 1987 Proxy Season, October 1987, at 5-18; IRRC Corporate Governance Bulletin, Vol. IV, No. 4, July/August 1987, at 112-113; No. 3, May/June 1987, at 66-67, 90, 96.
36 Bills are pending in Congress that address shareholder access to registrants proxy machinery. See H.R. 2172, 100th Cong., 1st Sess. (1987); H.R. 2668, 100th Cong., 1st Sess. (1987); S. 1323, 100th Cong. 1st Sess. (1987).
37 In the June Release, the Commission proposed adding a note that would have stated that where a proponent requests a copy of the registrants shareholder list in order to be able to limit appropriately his delivery of written proxy materials to shareholders and the registrant refuses to provide the list, Rule 14a-8(a)(1)(ii) would not bar the shareholder proposal even if the proponent exceeded the limit contained in the Rule. The note is not being adopted because the 25% limitation is being deleted.
38 Proponents that undertake independent solicitations must comply with the filing and disclosure requirements of the applicable proxy rules. See, e.g., Rules 14a-3, 14a-6 and 14a-12.
39 17 CFR 240.14a-8(c)(8) and (9).
40 Rule 14a-8(a)(1)(i) 17 CFR 240.14a-8(a)(1)(i).
41 Rule 14a-8(a)(2) 17 CFR 240.14a-8(a)(2).
42 A technical amendment is being made to the second sentence of Rule 14a-8(a)(1) to refer to documentation of beneficial ownership of at least 1% of the securities entitled to be voted on the proposal, as well as the alternative beneficial ownership requirement of at least $1,000 in market value.
43 In light of the fact that registrants will need to review incoming proposals to address this issue shortly after receipt, registrants also might consider making objections to proposals believed to be excludable under Rule 14a-8 at the same time. In this regard, the staff has taken the position that Rule 14a-8(a)(4) 17 CFR 240.14a-8(a)(4) would prohibit the submission by a proponent of a second proposal of a particular shareholder meeting if one proposal has already been submitted and the staff has taken a no-action position permitting its exclusion in response to a request by the registrant pursuant to Rule 14a-8(d). This position would apply even though the time for submission of proposals under Rule 14a-8(a)(3) 17 CFR 240.14a-8(a)(3) had not expired. See No-Action Letter regarding The Firestone Tire & Rubber Company (available December 16, 1987).
44 As an alternative to an affidavit, the Rule also would permit the use of a declaration, affirmation or similar document provided for by applicable state law.
45 17 CFR 240.13d-101.
46 17 CFR 240.13d-102.
47 17 CFR 249.325.
48 17 CFR 249.103.
49 17 CFR 249.104.
50 See No-Action Letter regarding Motorola, Inc. (available October 8, 1987).
51 The Item 10 amendments are consistent with changes made to the Item in the November 1986 comprehensive proxy amendments (see Release No. 33-6676 (November 10, 1986) 51 FR 42048). The May 1987 modifications (see Release No. 33-6715 (May 27, 1987)52 FR 21934) created unintended logistical difficulties for registrants in tabulating the required information.
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